Fast moving consumer goods (FMCG) took a hit on December 9, with the Nifty FMCG index down 1,292 points (2.24 percent) to 56,453 in intra-day trade. 14 out of 15 stocks in the index were in the red, indicating widespread selling after Godrej Consumer Products Limited (GCPL) warned of a challenging margin environment in its Q3 preview. Notable decliners include Marico (4.36 percent), HUL (3.77 percent), Tata Consumer (3.40 percent), and Britannia (2 percent). Shares of GCPL fell 9.5 percent to Rs 1,118 on the NSE, marking the biggest fall in the pack.
GCPL is leading by fall
Shares of GCPL rose over 9 percent to Rs 1,118, marking the biggest decline in the FMCG pack. The company attributed the margin pressure to rising palm oil prices and output prices, which are rising between 20 and 30 percent year-on-year, which has significantly affected its soap business. GCPL also reported possible volume declines in key segments such as soaps and household pesticides.
GCPL’s preview showed a year-on-year decline in earnings before interest, taxes, depreciation, and amortization (EBITDA) for Q3 FY25, despite growth in internal revenue. The company highlighted a significant increase of 20-30 percent in palm oil and its derivatives prices, affecting its soap division, which accounts for one-third of its revenue.
To combat rising costs, GCPL implemented price increases and reduced soap sizes, which affected inventory levels in retail and domestic channels. The company expects volume to recover if prices stabilize in the coming quarters.
Investor sentiment is turning cautious
Brokers such as Jefferies noted that GCPL’s comments raised concerns about a slowdown in the FMCG sector, particularly following weak Q2 GDP data that hinted at a slowdown in urban consumption. While some signs of rural recovery are evident, urban demand—the main driver of growth—remains sluggish.
FMCG heavyweights, including HUL, Britannia, and Nestle India, are bearing the brunt of this shift in sentiment. Experts suggest that the sector may face problems until input costs stabilize and consumer demand strengthens.
With the country’s broad consumption under pressure, FMCG stocks may remain under pressure in the near term, which poses challenges for investors and the economy as a whole.
